Marc Lowlicht (Further Lane Asset Management wealth division head): What I take more from this article is not as much the purchase of Sterling Commerce but that
IBM
Chief Executive Officer
Sam
Palmisano
Sam Palmisano
plans to spend $20 billion on takeovers in the next five years. This statement indicates that IBM believes software companies are trading fairly cheap here and there is an opportunity to grow their business through acquisitions.

Bill Singer (Stark & Stark law firm shareholder): It certainly shows that the once formidable hardware company is truly converted into software, consulting, and services. This acquisition seems to be an attempt by yet another player to gain a foothold in the emerging “cloud” technology field. It will be interesting to see whether IBM overpaid for Sterling, or whether the “cloud” fully matures into a meaningful B2B scenario.

Forbes: What do you think this means for the technology sector? Are there any companies in particular that seem ready for a takeover?

Lowlicht: I am not an analyst so I am not in the business of determining who is a prime takeover candidate, I will leave that to the experts in that area. In a general sense, I believe the technology sector should outperform over the next few years. There are a number of reasons for this. The first is that technology put in place for Y2K in 1999/2000 had depreciation schedules of either five or 10 years. The products with five year depreciation schedules will need to be replaced for the second time since 2000, products with a 10-year schedule are due for upgrades now. In addition to this most of this technology is obsolete and in order to be competitive and efficient companies will need to replace older computers and other products as well. As the economy improves and companies loosen their purses this is where I believe these funds will be spent.

Singer: As to takeover ideas, I am convinced that the iPad is showing us that the age of large hard drives and office-server dependent business and social computing is dead. Although at first a skeptic of the iPad concept, I finally visited an
Apple
store and got my hands on one. I was shocked at how light it was, how user-friendly and intuitive it was and how much easier it would make traveling. The other thing that became readily apparent was that if my files could be saved in the “cloud” or whatever non-hard drive manifestation will eventually emerge, that the iPad and similar platforms become even more useful.

Consequently, I would be looking at tech companies that will become players in the emerging cloud technology. What would come to mind immediately are software firms that are in the forefront of encryption and online security. The key challenge to getting users to migrate from drive-based memory to “cloud” will be the concern about security and safety of the stored data and content. I don’t have any specific recommendations at this time, but I am beginning to look, around.